Gary Mortensen of Stoller Wine Group on overcoming obstacles during the pandemic
Very few leaders will experience the amount of adversity and business obstacles as Gary Mortensen, President of Stoller Wine Group, experienced in 2020/2021 during the pandemic.
In this exclusive K-curve case study, you'll hear how Gary and his team at Stoller Wine Group pivoted, invested in various parts of the business, and worked through challenge after challenge related to the pandemic and Oregon wildfires.
Episode Highlights:
02:31 - Stoller Wine Group’s strategy before COVID
12:44 - How Gary and his team developed a culture of innovation
18:00 - Investing in the growth of Stoller Wine Group through marketing, sales, and innovation
22:11 - The impact of COVID on the operations
27:35 - The challenges that hit Stoller Wine Group
28:07 - The impact of the Oregon wildfires on harvest
33:55 - Gary’s mindset around innovation
48:50 - The biggest gift to come out of the pandemic
Resources/Links Mentioned in this episode:
About the Guest
As president, Gary brings to Stoller Family Estate thirteen years of senior leadership in the Oregon wine industry. As a start-up veteran he brings a passion for bleeding-edge technology and pushing boundaries. As a devoted historian, he is committed to preserving and sharing our nation’s diversity and heritage. He is also an active foundation board member of the Technology Association of Oregon, and is helping to found “Innovation Academies” for kids. Gary is an award-winning director of two documentary films telling the stories of Oregonians who served in combat in Afghanistan and Iraq.
Transcript
DISCLAIMER: This transcript is automatically generated by Descript. Please excuse any errors.
[00:00:00] Rick Thomas: [00:00:00] hey everybody, I'm excited to introduce today's guest as part of our ongoing series on K curve case studies, Gary Mortensen, president of the Stoller wine group.
[00:00:09]So in seeking to interview compelling business leaders on how they have adjusted to the economic challenges brought on by the pandemic. Gary has been at the top of the list and I'm excited to finally have some time with them for this discussion. Simply put, Gary has seen more business crushing obstacles this last year.
[00:00:27] The most leaders will experience in a decade. And as you'll learn, there are a few leaders as prepared as Gary to deal with the adversity and the challenge of having to pivot the business in the moment, armed with a degree in political science.
[00:00:41] A deep passion for military history and an appreciation [00:00:45] of what it can all teach us about business and strategy. Gary has a long history of applying these perspectives in launching both tech, startups, scaling multiple wine and hospitality businesses, and even in producing award-winning military documentaries as leader to Stoller wine group, Gary has led the organization through multiple challenges this past year, while still achieving year over year growth.
[00:01:09] As discussed in my original blog post on the K curve and confronting a black Swan event like the pandemic. It's one thing to be lucky and find yourself at the right place at the right time with the right business model that can take advantage of the conditions forced upon you. It's another thing entirely to be facing the financial implications brought on by a global [00:01:30] pandemic in an industry that is highly dependent on retail traffic.
[00:01:34]And as Mike Tyson, once famously said, everyone has a plan until you get hit in the face.
[00:01:39]Gary's story shares, just how they responded after getting hit multiple times, as you will hear. So one last note before we get started is I am new to the podcasting realm. I am still getting my equipment dialed in. Unfortunately, the audio is not the best at times, and I apologize for this.
[00:01:56] And I've already made changes to ensure future recordings are of higher quality. Hang in there though and give it a listen as I'm sure you'll agree. It was worth the time and you will have found it interesting Swan with the show.
[00:02:10] Welcome Gary appreciate the opportunity to have this conversation with you. This [00:02:15] one I've been wanting to have for quieter while if you could take us back to around that January timeframe, 2020, so almost a year ago, what was your assessment of where the business was sitting?
[00:02:27] And leading up to the point before COVID hit.
[00:02:31]Gary Mortensen: [00:02:31] It's sort of interesting. You've been on along this ride with me for most of my career at Stoller started back in 2012. And I think we got you involved pretty early on. So, so you know that our path was scaling and there had been a number of significant milestones over the last few years that enabled that scaling.
[00:02:52] And a lot of that centered around us acquiring. A lot of the vineyards that had been previously committed to [00:03:00] outsourcing, to selling to other vineyards and wineries. We started a three-year project of canceling all those great contracts and putting ourselves in a position to be able to grow. We were then next faced with the idea that we would increase production.
[00:03:13] And so we started to. Build the infrastructure, including a second winery. Along the way we started to go from in 2012, which was a 900,000 case winery to in, 2018, was 150,000 case enterprise that included some merger and acquisition with shalem winery and off in the launching of a second brands.
[00:03:34]And a strategy to put us in a position to massively scale and just continuing to take those steps. A lot of that also stemmed around talent acquisition and just sort of [00:03:45] growing the existing talent that had the capacity and the ability to scale. And bringing in those people that we may not have had in the past that also were in that position that can help us grow.
[00:03:56] And so January of 2020 seems a long time ago,
[00:04:01] Rick Thomas: [00:04:01] A lifetime ago.
[00:04:03]Gary Mortensen: [00:04:03] But as we were sitting here in in 2019 in, quarter four of 2019 our plans were ambitious. There was nothing that was suggesting that our well-played and thought out offensive strategy D for continued growth was going to be, do doing anything other than fulfilling yourself.
[00:04:21] And it's important to understand in our business that we're gonna be phases. One of those phases is we have a partner. Bill Stoller has a very [00:04:30] active partner in his in his business. And that's called mother nature and our heart we're agriculture and mother nature doesn't really care if you want her as a partner. So, we start off with with an agriculture product and then we go right into manufacturing and producing that product. And then we have multiple channels of how we sell that. And we sell it as far as a large percentage of our boxes go out to our distribution network, which sells everything on a regional national basis.
[00:04:58] Then we have not only one, but now two tasting rooms of Stoller plus another one was Shalala and we sell that direct to consumer. And then within that, we also have business to business and all of those pistons were hitting, you know, very well as we were rounding 2019 coming into 2020. [00:05:15]We wanted to diversify one of the things that Rick, I know you were active in participating in.
[00:05:21] Was a couple of years ago I started chirping about the need to expand our portfolio, to create a value based product line. And it was really informed on the idea that the economy, something happened to the economy. And I remember all of us guessing, so naively that it was going to be a recession or, you know, some little thing, you know, predictable thing.
[00:05:40] Rick: [00:05:40] Little road bump.
[00:05:42] Gary Mortensen: [00:05:42] Yeah, a little bump, but but the reality was that we wanted to start to think about that. And at the same time, we wanted to start thinking about changing generational habits and consumption. So we started to work with the cans. I had this conversation just last night with bill about generational consumption, because it really is important.
[00:05:59][00:06:00] We have, it's important that we look through the lens always of those emerging drinkers and things are really changing and they were changing rapidly before 2020. we were seeing that, you know, what folks were wanting was different than maybe their parents. I call it the dad's Nike golf shirt effect.
[00:06:16]You know, you don't necessarily want to be wearing that because. That, that, that commercial where it's like, you know, don't act like your parents. It's kind of funny, but I hear that very clearly all the time. And so we ended, you know, we, we came into 2020 ready to go, but also understanding that there was going to be an ongoing series of challenges such as consolidation within the the national distribution network.
[00:06:41]That the distributors are getting bigger all the time. The number of wineries they're [00:06:45] working with is shrinking. And so, you know, there was market conditions that were a headwinds that are always there. And as you know, the fact that we are a winery is probably about number 10 on my list of the most important things about us.
[00:06:58]And. From my perspective. It was always important as we built this team, we, that they understood that we were a lot of different things, including a winery. But primarily we were a sales and marketing company that we're a branding company that we're a hospitality and experience organization. We're a communications company.
[00:07:15] My favorite one that I threw out that you were at one of the retreats a couple of years ago, it was information brokering, but all of those things are true. You know, and we're lucky enough to our product. We're lucky enough to have it'd be wine. But wine is also the most [00:07:30] competitive product on earth.
[00:07:31] There is 65,000 labels for sale at any given time. And I would challenge anybody to walk into a grocery store and find a more competitive, expensive set than wine. So that's, you know, that's kind of the crazy job that we all have decided to work in. And so. Those things make us those sort of progressive pre-read liquids make us a little bit crazy and a little bit entrepreneurial.
[00:07:55] And so that has always been when I've brought on new people. I really don't care if they know anything about wine, what I've really cared about is can they be agile? Can they be innovators? And they see opportunity that isn't. So immersed in the dogma of wine culture [00:08:15] that, that you can't see beyond that.
[00:08:16] And so that's kind of how we've set sail. And so, as we came in and rounded you know, first base on a 2020 it was one of those things where we crushed all records for January and we crushed all records for February. And there was no slowing down. There was no slowing down. And and it was I remember that Sunday morning, my son called me from college and asked me if I'd heard about Kobe Bryant. And it was shocking news. And the shocking news at the moment was in February, we were all sort of trying to make sense of the loss of Kobe Bryant. And in other news, the Wuhan virus was being talked about in China and things like that. If you fast [00:09:00] forward, just a few weeks later, it's the middle of March and I've pulled together which seems horribly irresponsible now, but the entire, most of the entire company into our tasting room, And we were having this conversation that this might be the last time that we were going to be getting together in person like this until maybe as late as mayor Jim, because this virus was going to be something we want to go to ground on.
[00:09:30]And and so, you know, that was the conventional thinking was that May or June was going to be something that, you know, we'd have to write out all the way through there. So three or four months even. So that kinda set the stage for the rest of the year.
[00:09:41]Rick: [00:09:41] talk us through that because it [00:09:45] is come in waves for the wine industry and for the Stoller wine group. So talk us through that. What was the initial response for the team, would this kind of may timeframe, we're going to be back to whatever normal looks like and then what happened.
[00:10:02] Gary Mortensen: [00:10:02] Yeah. So our business the wine business is really there's several legs of our stool. And one of those is our national market. In the national market, there's two significant pieces that make up that national market. And one of those is runt business, which first Stoller and the Stoller wine group disproportionately larger than our grocery store business.
[00:10:25] And it has a lot to do with historically, you know, how big we were, [00:10:30] but also the kinds of wines that we make, how we make those. $15 unless we were making more expensive lines and they lend themselves very well to restaurants and by the glass pours and things like that, starting to help grow our retail business.
[00:10:43] But it's definitely, retail was definitely the smaller piece of our business. And by far, the most lucrative part of our business is anything to do with the tasting room and direct to consumer because we're cutting out all the middlemen directly from manufacturing, all the way to consumer and all that.
[00:10:59] In the middle, it goes to us. So, Rick has been, you've been in my office many times. You've seen my whiteboard room and say it's my happy place. It's balls of light ports.
[00:11:09] Rick: [00:11:09] Mad meanderings of that movie a few years ago a beautiful mind [00:11:15] comes to mind.
[00:11:16] Gary Mortensen: [00:11:16] in more ways than you may think, Yeah, it's but you know, call Klaus woods said something to this extent that the best way to ensure the peace is to prepare for war. You know, w I have a senior team. We have over 140 employees now enterprise wide, and I can't manage all those people.
[00:11:35] And so we put together a senior team, vice president, Isn't it level folks that are engaged winemaking and vineyard production direct to consumer our financial side, our national sales, and they brought those guys in and and started to talk to them about the fact that we this was going to be potential for something that was going to be much, much greater than a few months, and that we should prepare for that [00:12:00] in the event that it is only a few months.
[00:12:03] That's okay, too. In fact, that's preferred. But we should anticipate something worse to do that. And I guess what that means is the impact, the immediate impact was the American United States restaurant industry, utterly devastated. Now, when all we, all the SWOT analysis that we've done, you know, and tried to get really way out there that was never factored in.
[00:12:26]You knew that this was happening. The other piece was our really our bread and butter, our tasting room was now massively restricted in NH and for a time shut down. So that left us with only the smallest part of our business. So, if that's the rule in the box, if that's if that's what you've been given.
[00:12:44] You know, the only [00:12:45] cold comfort at all is that's the same rule that everyone else has been given to. And so this is what I think you have to have a culture of innovation and you have a culture of we don't give up, we don't surrender, we don't lay down. In fact we get aggressive and I think fit.
[00:13:02]There's a message that I would share with anyone is that there's always a way out of everything. You're talking to a startup guy. Who's had to find ways out of everything.
[00:13:11] Rick: [00:13:11] right, right. And actually in, I want to come back and I want to unpack. That the whole discussion around innovation. Some more but just for context let me share this. And we looked at this prior and I've actually written a blog post about it, but around any we're talking about restaurants.
[00:13:30] [00:13:29] So the framework of the K curve where would you put restaurants in in, in kind of this diagram?
[00:13:37]Gary Mortensen: [00:13:37] I think some will get the blues you know, which is You got a real downward projection project pathway there. The reality is that many of these guys are they're going to go extinct.
[00:13:47] So you could almost, you almost have to kind of bifurcate this into a few spots, which is If you're an independent small restaurant owner,
[00:13:55] Rick: [00:13:55] Right.
[00:13:56]Gary Mortensen: [00:13:56] They're going to, it's a Permian level extinction. They can't afford it. If you're a taco bell, you know, or if you're, you know, the big guys have got the deep pockets and they can advertise on TV and you can do all the things you need to do.
[00:14:09] And you're already known for being funny lenient, you know, then [00:14:15] then, and they've got a little bit better shot. Let's kind of, we'll emerge out of this. It's going to be interesting to see No. I think that the corporate bigger well-funded chains are going to do all right there. They're doing all right right now.
[00:14:27]Comparatively speaking I think that have a sorting out of that as well. So, so I would say that, you know, somewhere in that K the upper part of the cave for the larger, more well-funded restaurants. And then I think that as you look at independence You're going to be going. I'm more on that downward trajectory and it's going to take them longer to recover.
[00:14:46] Rick: [00:14:46] Yeah, I'm curious because you talked about how by the glass and restaurants were such a significant part of one of those legs of revenue channels. Do you have a feel for how [00:15:00] much of that channel was impacted, where they just didn't have the balance sheet and they're going to be extinct.
[00:15:06]Gary Mortensen: [00:15:06] it's huge. It's massive. I mean, they're over leveraged Dave, you know, these folks, the restaurant business is it's no secret that the restaurant industry is hard. It's really hard. And restaurants come and go all the time, but what we started seeing it, and it's a natural thing. When you look at the bottom of the curve of the K there the STEM of it, I guess that piece that you were just pointing to, you know, it's, I guess it's sort of predictable that you would see that happen, where you started to see what were some of the more iconic, independent restaurants like blue hour. Pod POC guys like that, that are going out of business, that they couldn't stand at Toro Bravo. So these are iconic Portland [00:15:45] restaurants that normally would have survived, something like this. But you know, they just they could, and then what's worse about that is, is then you have going out into the market is you have all those unemployed.
[00:15:56] Wait and people that are, they can't find work. and then now they can't pay rent and all this. So there's this cumulative effect. And you know, a lot of restaurants tried to stay in there and keep their staff busy. And again, there was this anticipation that this may not last, but even with stimulus, you're still shut down. There's just, you know, I mean, there's nothing you can do. PPP was helpful, but they're running out of that. There's nothing they can do. And so their models we're designed to be that agile. And there are some people that are finding ways, the more innovative ones but by and large, [00:16:30] you're seeing just massive carnage.
[00:16:32] I don't see it. I don't see it letting up for awhile.
[00:16:35] Rick: [00:16:35] Right. So again, as the Stoller wine group was hit with this initial kind of shutdown and anticipating you know, may opening up and that kind of dragged on how would you describe the path for the solar wind group through this? I mean, clearly you made it past, you know, extinction. The extinction hurdle.
[00:16:54]But where did the business go from there? Was it an immediate rebound or were there a series of kind of ups and downs in, in how the business responded to your activities?
[00:17:05] Gary Mortensen: [00:17:05] was interesting. So we had I was very active with the team pushing the team To innovate and you know, one of the things that we wanted to do was, okay, [00:17:15] so your tasting room, people can't come to the tasting room right now. What are we going to do? So coming up with things that we could do, and one of those was we took our best sales people and we turned them to insight callers. We had 10,000 people that have visited the winery before, and we've never reached out to. So we started with that and said, let's go say hi. And we just from there, and we just kept working that way. So we created a, an inside calling team. We created a you can come out to the winery, people still wanting to get out.
[00:17:44] They just couldn't legally stop. So we did create a great little tent set up on the outside where you could drive by. Some wine, see familiar faces. We'd let them drive around the property for a little bit and then go back home, but they want to get out of the house. So we understood the [00:18:00] psychology then.
[00:18:00] So we took advantage of that. We started a video production unit inside our own or an organization because things I've been thinking a lot about prior, even to this was an insatiable need for content. And so, you know, going on the offense and spending money, which seems counterintuitive. You've got to do that. And these are the kinds of things that we had to do, which was to. Take our message out. You're not, you can't come to us. We had to bring our projector. So we started doing cooking shows and we started doing zoom calls and all the things that a lot of folks are doing, but we were doing it better and doing it in a way where the quality was really high.
[00:18:36] Rick: [00:18:36] And by the way I will say I will include links to a lot of that stuff that you're talking about Gary, because it truly is it's [00:18:45] quality work.
[00:18:46]Gary Mortensen: [00:18:46] Oh, thank you very much. Yeah. And it, it was an opportunity for us to brand ourselves in a way. And when we were doing this, we were thinking, you know, let's be intelligent about this and let's not just make you know, information for end users. But at the same time, let's make stuff that our distributors can use.
[00:19:03] And our, you know, the tray. It, and everybody can look at that. And so, you know, we wanted to make it multi-purpose and so we made different versions of it and stuff like that. And then we also just, we started really getting aggressive on buying ad space you know, Google you know, Facebook, Instagram, all of that.
[00:19:19] We started really working with that. We have an analytics team in house and you know, the marketing team. And we're a very lucky that bill has given me the, you know, [00:19:30] the. The free reigns to build a marketing team because the marketing team became strategic for us. At that time and continues to function in that way is that they really are authentic.
[00:19:42] They're out there doing more than anyone else right now. As again, as we're shut down to here, we are in December and have been shut down again. You know, with only outdoor seating, which it's winter I, so, those kinds of things they have made a huge difference. And then on the national side, We had already been setting up this strategy of moving and shifting our national distribution to Republic national distribution Corp, which is the second largest distributor in the United States, a $21 billion company growing. When we formed the [00:20:15] Stoller wine group, which was again, Stoller wine, Rishi Halen winery, and then underneath that chemistry, which is our value wine, or under $20 value wine. And they can't Oregon cans alternative packaging. The strategy behind that was to be able to go to our distributor and say, you don't need to deal with.
[00:20:32] For different folks. We come to you with the complete package. You should work with us because we're one throat to choke and we can, you know, but I also I made a point of hunting down the CEO and defending him and communicating him with directly because I wanted him to understand that, that we understand that we're in a business and that wine is a business and it wine isn't just romance in that wine.
[00:20:56]That we need them to be quite frankly, we want to make their lives [00:21:00] easy by working with a company that understands. That one of our number one jobs is to make their lives easy. And so, and making them understand that we also had the ability on every level to scale as large as they wanted us to scale.
[00:21:13] And so we had been really building that relationship, you know, last year, 2019. And so when 2020 came around and we started seeing what was happening that was my first phone call was to the CEO of RNDC. And to assure him that not only were we going to be around, but we were going to be in a position to go on the offense. And so, that was really important because what that did was he started to introduce me and expand the satellite network of exec senior executives that I got access to and my team got access to. And you know, it was [00:21:45] really critical for us to start that because what that did was that allowed us to rapidly grow.
[00:21:52] Or it's called off-premise, which is grocery store packaged store business on premise being restaurant. So we were able to quickly make up make up for the you know, the losses that we were suffering on the on-premise side. And so we we had a tremendous March. We finished the quarter off blew all the records away.
[00:22:11] And with two weeks of COVID April came around and Yeah, there was so many people that wanted to support us, that we were able to eliminate a lot of expenses that were superfluous expenses, not human capital expenses. We got aggressive there. And then we we had a lot of orders from our national distributor and [00:22:30] we ended up having a record April and then may came along and may was his has historically been Oregon wine month. And it was, it's always been probably our biggest month of the year and may was an unmitigated disaster for not just for us, but for everybody.
[00:22:45] Tasting rooms were still shut down until right before Memorial weekend.
[00:22:49] That's, when you got to say, okay, what are we made of here?
[00:22:52] Rick: [00:22:52] Yeah, it's getting real.
[00:22:53] Gary Mortensen: [00:22:53] So you don't know what June's going to be, you know, may you went riding high and then yet boom way down in may. And and so we really started to contingency plan at that point as to what things were going to look like.
[00:23:04]So we had multiple levels of what ifs that we had already built out, but we were getting a scrappy and our vice president of consumer was really had built out a model based on reservations that [00:23:15] if, and when we'd be open again, we would shift from, Hey, everybody can come because that wasn't going to be happening to a very intelligent Reservation only model with a massive attention on COVID protocols so that you could come out here and you can feel confident.
[00:23:30] And and then our video team produced a welcome back video where everybody react. And here's this, I guess is sort of an example of here's a business example.
[00:23:38]There was our industry that will I'm at Valley wine versus association specifically was. Building out this and kind of feeling out the constituency as to whether or not they wanted to ask all of the consumers that would be coming up if they want, if they would be willing to sign a waiver, releasing the winery from any responsibility to do the Cobain. [00:24:00] And then I started seeing some of the, yeah as it was getting close to where we could be open I was seeing examples of warning
[00:24:07] Rick: [00:24:07] Yeah, welcome to the winery.
[00:24:08] Gary Mortensen: [00:24:08] yeah, and by the way, you know, pull the chair. So, to me that was all you know, it was this heavy handed ham-fisted and, but what it represented was a scene that no one.
[00:24:20]Which is what I'm always looking for is that advantage. We're lucky that we have an in-house video production team of three impossibly young under 23 year old men who are fabulous at what they do. And
[00:24:32] Rick: [00:24:32] One who, which by the way is your son Jack and also Produce the song or the music for the podcast, by the way, just had to mention that is it's incredibly talented. Yeah.
[00:24:45] [00:24:44] Gary Mortensen: [00:24:44] shameless plug, but but you know, we had an opportunity right there. And so I woke up in the middle of the night and I thought it's obvious we have to run a musical. And so we did a 92nd. I think it is 92nd. Welcome back video using our, we have some really incredibly talented people in our team.
[00:25:03]One of our one of our folks is she actually finished fourth in the world in Irish dancing, so she can dance. And we brought in a young gal who lives down the street from me. And she teaches Nike folks how to do flash mobs. And and then my son knows a tremendous singer, Haley Johnson who finished I think the semi-finalist American idol a few years ago.
[00:25:24] So we were able to quickly pull that together but it, it brought this incredible energy when it was [00:25:30] released. And it made it okay, at least in our minds to, to want to come back because we, you know, we, the whole communication was you to be safe. Welcome back to the place that, you know, in love with a few new rules.
[00:25:43] And that was sort of the idea. And that's kind of an innovation in marketing. That puts us way ahead of everybody else. So, you know, I guess my advice always is to be thinking in that nonlinear way and, you know, just because a bunch of people are doing something doesn't mean it's right. Our industry is particularly capable of falling each other off a cliff.
[00:26:04] And and so, you know, you just can't, you can't do that. And so that, and so we, from there, we've just been How we communicate with our customers and consumers has been less about [00:26:15] buy, please buy from us and more about, are you okay? Or here's something entertaining. Here's our winemakers, which everyone, you know, you're into wine or you're typically interested in wine acres.
[00:26:24] And and so we give it giving a lot of content around wine and food and stuff like that. Just fun content from all the different brands. So it's a chance to promote the brands in ways we haven't. Maybe wouldn't have done in the past. So it was an opportunity. So we created value out of an impending disaster.
[00:26:38]Based on that. And, you know, I can fast forward to now I can tell you that our web sales we did hardly any discounting and yet our web sales are off the charts with much, much better margins. We also were able to a couple of very large National deals with one's a middleware provider, when is a network TV network, we're doing [00:27:00] virtual tastings with folks and, you know, having a winemaker come in and do an hour with all of their clients.
[00:27:05] And wow, we've done about 50 of those and actually many more but 50 with those groups. And they've been lucrative for us, so found ways to offset. And that's what you gotta do is You know, you got it. Doesn't matter what hand your deal. You got to figure it out. You got to just innovate out of there, but transformational change a culture of innovation.
[00:27:26]Those have gotta be the North stars. At least it really at any time. I mean, the times like this, you have to, or you know, you're either a reactive or proactive.
[00:27:35]Rick: [00:27:35] There's a number of questions I want to ask around that, but want to talk about just to give the listeners full context of all the th the waves and the [00:27:45] challenges. So, and then the fires
[00:27:48] Gary Mortensen: [00:27:48] Well, even before the fires, Rick. Peanut Nawara is a very fickle, crazy kind of fruit. It used to always be Cabernet, but then people really discovered the greatness of Pinot noir and Pinot noir is very vulnerable. It's the most vulnerable of all the red wines and we've been enjoying a hot.
[00:28:04] Rick: [00:28:04] because of the the thin skin. Is that
[00:28:07] Gary Mortensen: [00:28:07] Yes, it's thin-skinned and it's just, it's finicky about too hot, too cold, you know, there's all kinds of, it's just finicky. But we had the last few years enjoyed It's wonderful. Bumper crops have actually more yield than anticipated we're going to play very big averages here, but we'll say an average year, it's reasonable to expect that you can get [00:28:30] three and a half tons, an acre of Pinot noir, and depending on what you want to do with it, you can crop up to for the last couple of years we had. Five tons or more if we wanted to, we had to crop that down, but to get higher yields are great because lower cost to goods. So we're bringing in more fruit per acre and it was great. And the quality has been exceptional. We've had we've just been blessed with great years, since 2013, where we have a 50 year rain event, it's still, we were able to make great wine with that. What happened in the spring is the most important part of the story on this next piece is because we had a really cool, wet, unhappy spring. And anybody that remembers that it was it was father's day and I'm out there building a wall of my sons and I'm just cursing the [00:29:15] heavens. Cause I guess we're going to stop writing.
[00:29:17] And and mother nature was doing that. And what that impacted was the peanut war and the peanut grief fruit sets. We didn't really fully understand that until we got into weighing that fruit. We had an idea, but not really how extensive until we got to wane that fruit in August. What we found out was that it was going to be reasonable to expect that our peanut Nawara, our yields were going to be down against, let's say historic averages as much as 30 to 60%. The berries, which are normally, you know, side of a marble, you know, these were tiny little things, like little berries. They were just, but as awful as that is in terms of, you know, it's going to be expensive, we were going to go just buy more fruit, [00:30:00] bring it in. So we'll get out of our quantities. We had projected 160,000 cases.
[00:30:05] That's an important number to remember gonna make And we were way under that number. So we're going to source fruit, bring it in and supplement. So that was the strategy. The good news is that the quality, anytime you get that kind of concentration, it's just, it could have been in the you know, the vintage of the maybe all time then, you know, so, so you're you've got, COVID the impact of COVID, you know, Getting as hard and not only us, but everything that supports us around us restaurants, all that stuff.
[00:30:37]And then you've got little yields coming for the next year, which means you've got to scramble to try to find fruit and right on the [00:30:45] heels of that came what can only be described as, you know, a biblical disaster of the entire West coast being on fire.
[00:30:52] Rick: [00:30:52] Right.
[00:30:53] Gary Mortensen: [00:30:53] Oregon has sat. And the last few years watched with poor as our friends to the South and in California and Southern Oregon at times through some pretty severe times.
[00:31:07] We've never experienced anything like this. And so when it hit us and that in that smoke came in and then there was no wind and it just sat on us. That was on an already tough year. That was a tough one because obtained is something that you can't wash off. You can't rub it off. You can't do those kinds of things.
[00:31:26] It's not works. It actually penetrates that thin [00:31:30] skin. And it binds with the sugar molecules, like in the movie alien, you know, when the guy's got the thing in his face at some point he decides to just Aiden come out and. Explode out of you. And in this instance, that explosion is called the unbinding of the sugar molecules and it's smoke taint, and it's a little bit like dumping an ashtray into your wine.
[00:31:51]And so, you know, there was there's and we've never experienced this before. So there was all this, you know, what do you do? What are we going to do? And interesting because some wineries, very well-known wineries in Oregon threw up their hands and made nothing. Other wineries made everything as expected.
[00:32:07] We we made, we are going to make no reserves. We're going to make no higher end legacy tier, but we're [00:32:15] going to make a lot of Rosa because Rosa is the one line that the taint is there. But by the time it unbounds over a year to you, that wine is usually consumed. It was the strategy. And we sell out of our wines, our rosés every year.
[00:32:30] So, More of that. We're making different versions of it. We're experimenting with new product lines, stuff like that. But so that was our reaction to it. But what we couldn't do was we couldn't find any fruit that wasn't compromised. So that number of 160,000 is going to be all said and done 85,000 cases. So my next challenge, you know, the gift that keeps on giving now is going to be. Goods for not just next year, but into 2022, because all the Rosa is, and those [00:33:00] wines are released next year in 2022, the peanut Wars come out. So, so when you think about our business and the impact of this disaster, you know, and for many other organizations too, the tail on this is going to be a while. I know bill Gates came out and said he didn't think, you know, people, the airlines would be back to normal until the summer of 2022. And it kind of makes sense. You know, psychologically, I who's gonna go to a concert or who's going to go out and what nailed the sports, arenas and stuff. We're all a little bit unnerved by this.
[00:33:33] And so how does that inform us going
[00:33:36] Rick: [00:33:36] Sure. Sure. And no doubt, I mean, this, as you described, this is still unfolding and will take several years to unfold [00:33:45] for the wine industry, for the Stoller wine group, let alone other. Other verticals of the economy that are still trying to predict, but let's go back because you have talked about innovation.
[00:33:55] You've mentioned that several times and maybe a place to start where was your mindset around innovation? Really forged.
[00:34:03]Gary Mortensen: [00:34:03] I've always, I think I've probably always fancied myself being somewhat creative. And I was in the wine industry the first time in from 89 to 99 Sokol Blosser. And I didn't really realize how entrepreneurial it was because I didn't have any contacts, but that was the early days when you just had to come up with creative stuff to survive. And we just tried different things on and, you know, wow. That's crazy. It was, you know,
[00:34:26] Rick: [00:34:26] Spaghetti and see what
[00:34:27] Gary Mortensen: [00:34:27] Yeah. And so that was kind of, I [00:34:30] think that, you know, that was probably my first opportunity to do things. But really in 1999, I went to work for a gentleman by the name of Pat Cox, who founded after one telecommunications and went off and started his own startup called QSEN.
[00:34:44]I was employee number one, and I was still this data or understand why he would hire a wine guy. Use stuff in technology, but he did because I brought wine over to his house, but it wasn't, it was sort of this moment where I realized that this is what I was supposed to be doing was something in this area where we're creating stuff and working around and being inspired around people that have already had a huge track record of success entrepreneurial.
[00:35:08] And so. Preneurial side really came that need. And I, and as I became more and more exposed to people that talked about and could [00:35:15] demonstrate what it meant to be innovative, spending lots and lots of time picking their brains and watching, and then getting to do things myself where there's really no rules in a startup, you know, not a lot anyways.
[00:35:28]And getting to, you know, make a big mess and be creative and. I was asked to head up what would become really the initial pre Uber taxi app. And we built that IQ taxi and it was 1999, 2000 2001. So, you know, it was way ahead of its time. And it was also way ahead of the technology.
[00:35:48] And we built it and then went on and did lots of other really cool stuff in tech startups. And. But it became it's very addictive, very seductive thing is being involved in things that are [00:36:00] around innovation because you find yourself attracted to people, share that. And I remember we were starting another small company. Sitting around these people. And I got such energy off of them because it was a little bit like you're framing the constitution. You know, you're a group of people passionate about something you're ideating all the time, and you're coming up with these ideas and in, by the very nature of what you're doing, which is disruption, you know, you have to innovate because you know, you're not going to go out and create a carbon copy of something that exists already.
[00:36:33] You have to find ways to go out and improve that. And ideally you have to do it by being disruptive. And so, you know, I really got 11 years, really, all 13 [00:36:45] years of kind of, sugar high, I because you really out there you're on the tight rope and they're really, you know, the, net's not very big if it's even there, maybe you think it's there.
[00:36:56]And there's something exhilarating about that, but you gotta be wired for that too. I you've got to. You gotta be okay with that. You gotta be okay with the idea that, that. You know that the rules are there to guide, but not necessarily that you have to follow every single rule. You know, obviously all the legal ones.
[00:37:13] I think that's a disclaimer, but when I'm talking about convention and you just can't, you just, you have to look at your industry and go, is this really how it is? Or is there an opportunity and ideas are big and lots of those ideas are small. And you can't do it alone. You've got to have a team and a [00:37:30] culture that fosters that.
[00:37:31]And when you do and you know, you've been at all my retreats for the last seven or eight years, you know, it's always a theme it's around, you know, agility and you know, this idea of not being afraid to make changes or to ask questions, that's how you grow the fastest. So I don't know if that answers it.
[00:37:50] Rick: [00:37:50] Yeah. I mean, you're actually, you got ahead of me, which is great, which is you always do. That's your strength is being ahead of the curve in that early kind of formative period whether it was at Sokol Blosser with, you know, with Pat at QSEN, what would be Gary Martin citizens, laws of innovation.
[00:38:12] If you were to chisel those on a [00:38:15] tablet, similar to the commandments, what would they say?
[00:38:18]Gary Mortensen: [00:38:18] Well, the number one, one I think is just don't do what everybody else is doing. I hate that. I just. Eight that it's just like a, like kryptonite to me is to follow others. I don't know that there's this independent streak in me that just says there's a better way to do it.
[00:38:32]I think that's one. I think the other one is you've gotta always be curious about your business. And I see that when I see people sort of start to fade it's typically the Canary in the coal mine on that as they're losing their curiosity. About the business. And you know, when you go into that sort of like that road manual thing, then, you know, that's when I think it's time to look at maybe another option of doing something because, you know, you've gotta be dynamic.
[00:38:59]And you [00:39:00] gotta be a bit of a showman to show a person. We had a lot of financial challenges at soca Blas early on. It was the nature of the industry back then. And. You know, you had decisions, you know, are you going to buy, you know, you really need a new grape because that's not working.
[00:39:14]But you also got to make payroll and you know, What do you do? And so those are the kinds of thing, either find that really energizing. So I'd say the other command would be energized by a challenge, be energized by adversity. Because those are the things that, you know, you find a way out of it.
[00:39:31] And as I said earlier on, there's always a way out of everything and you just got to find your way out of it,
[00:39:35]And humility is also a big part of that, but it's it is saying, you know, we're not going to lose this. You know, that'd be cocky about it, but we're not going to lose. And, you know, in the [00:39:45] instance of soca Blas, or one of the things that we did was we thought, well, you know, we want to make our brand more well known.
[00:39:50] Well, let's do concerts. And while other people were doing concerts, they, you know, there were lots of little concerts going on. We brought out Tony Bennett and Ray, Charles and big folks like that. And we got other people to pay for it. And you know, and that put us on the map and then we. Launched a white blend called evolution number nine that no one had ever seen before, out of Oregon.
[00:40:11] And it was became instantly Oregon's number one exported wine to the other 49 States. And so, you know, little things like that that that really helped to move the needle because no one else was doing that stuff. And and then understanding that you can parlay that and into a great momentum.
[00:40:28] And it's one thing to do these things, but if [00:40:30] you're not also figuring out that next three, four, five moves down the chess board as to how that's going to support you, then, it's a one and done.
[00:40:37]Rick: [00:40:37] Thinking about all the innovative kind of, discussions and decision making that you've led the team through this year. what would you rank as the most innovative decision that you executed?
[00:40:50]Gary Mortensen: [00:40:50] I think it's one that we just did. And they're these little sample bottles, two out of sample bottles. And the marketing team came up with this and you can get a five pack of these little sample bottles and they have, are they have, they look exactly like our, they have our label, you know, they miniaturize the labels five wines and you put them out and honestly people have gone crazy for those.
[00:41:12] Rick: [00:41:12] I noticed they were sold out cause I tried ordering them.
[00:41:15] [00:41:15] Gary Mortensen: [00:41:15] Yeah. And I think they're back in stock
[00:41:18] Rick: [00:41:18] Okay, good. Good to know.
[00:41:19] Gary Mortensen: [00:41:19] But yeah. The and that's, I think we sold 2,400 of them in just a few days. And that, what that represents though really is the power of all of the pieces coming together. And that it's my marketing team being very innovative, the direct consumer team, getting excited, and then how we got that message out.
[00:41:35] How on the back end there's huge logistical issues of filling little, tiny bottles, you know, Shipping it out, all of that. But it's a good example, I I also have to say, I think the really shifting to digital content in a, making it a cornerstone of our business is huge, but, you know, I could go on and on about all the, how everybody in the team came up with different ways to to make this company [00:42:00] successful.
[00:42:00]Because a long story short of it is that we had our very ambitious goals that we've set out this time last year for our 2020 roadmap. And here's the reality. And this is I think the stunning part is that how we got there is very different than what we were planning plan here. And and then all these things happen.
[00:42:20] And so we ended up over here with our plan. We are hitting all of our objectives, all of our end of year objectives. Actually, we're more efficient. We are actually exceeding on in, in the areas that matter the most. And I was talking to bill Stoller about that last night. Mill's pretty stoic, but he had a pretty big grin on his hands and you guys killed it. And that's, you know, and the other thing is, I, you know, you just can't quit, you know, [00:42:45] innovation it's, you can have all the weapons that you can possibly have, but if you don't have the, if you don't have the people that are willing to put in that extra work to inspire others to lead, to do all those things then it's really you know, it's pointless or it's going to be sub-optimized and maybe that's the greatest thing, Rick.
[00:43:05] It just is just, you know, we've been talking about this stuff for a number of years and provisioning for it and hiring people and promoting people and doing those things. But this is the year where they Rose to the challenge and they executed. And so I, I think that, you know, if the game ball goes to that team for really.
[00:43:25]Executing on, and also, you know, many of these concepts, weren't mine, many of [00:43:30] these, the ideas like the parent, you know, raise them, but you know, they're on their own. And in this instance, you know, we had weekly meetings and would get very tactical on certain things that we want to try and execute.
[00:43:42] But for the most part, Across the board. This team Rose to the challenge they managed against the budget. They did everything they could and, you know, I'm proud to say that we never, for a loader person, we never asked anyone to take a pay cut. Even during that difficult may June when things were uncertain.
[00:43:59] Certainly a point of conversation, but it was never happened because we were able to offset the losses and then start to grow from that. But you know, we've been shut down again here. I for three weeks. So we've missed all of our December was greatly restricted before [00:44:15] that. I you know, lots and lots of reasons to feel sorry for ourselves, but you know, we didn't take it.
[00:44:20] We punched back and here we are. You know, and we're planning the same kind of thing for 2021. I it's, you know, 20, 21 is also incredibly uncertain. I you know, I think it's intuitive to think that the first half of the year is going to suck gradually suck less. And then maybe by the summer, things will be better.
[00:44:40]And you know, and if not it's, then we're going to be ready for that too.
[00:44:43]Rick: [00:44:43] One more question around this mindset of innovation, Gary, because as you said it, it takes more than one and in an organization your size, it really takes a team. But it's fair to say that you don't get there overnight. It's not like, instant mashed [00:45:00] potatoes where you just add water and mix and you've got innovation.
[00:45:03] You know, can you talk about what does it take to move a team that has not been really used to that kind of rapid fire ideation execute, fail forward mindset to where they're comfortable and generating on their own.
[00:45:20]Gary Mortensen: [00:45:20] well, it's two things. Well, it's a number of things. One is that as you know, I have, you know, the word disruption has been a word that is. Thrown around a lot. And, you know, there's a lot of catch words that get thrown around by, but for me, I literally mean it, which is you're not sure that enough.
[00:45:38] I is it making people challenge assumptions? It's making them be disruptive. It's training them to be disruptive [00:45:45] and it's hiring people. That actually understand that we've been very lucky and not everybody is that. And the other thing I want to say is that this team that I've got is very youthful.
[00:45:54] They're young. You could almost say green, but they're not as green as they were. This time last year, but but as a collegiate kind of atmosphere, I and I get energized by that by their youthfulness, because I know that, you know, me sitting around thinking like a 60 year old white guy, isn't going to benefit anybody.
[00:46:13] So I've got to be willing to change my perception of the world and how I think to actually be effective for them and for the business. And so what they think is valued highly and celebrated. And so, you know, you got to trust your team and you [00:46:30] gotta be willing to say, they're gonna probably screw this up.
[00:46:32]And that's okay because I'm okay with making messes. Cause that's part of disruption. I if we're worried about perfection, Yeah. You know, that's probably the wrong business that we're in. So you can't worry about perfection. Yep. Be about movement and and speed. And and knowing when to take advantage and sometimes when not to.
[00:46:51]So, but you know, you've got to have a team that is comfortable with being pushed, is comfortable with being, you know, that things aren't perfect or structured all the time. I that's probably been, my biggest challenge is I remember you know, several of the folks came on and they said, well, you know, just tell me what you want me to do.
[00:47:08] And it's like, Oh, then I'm doing your job. Do what I need you for. Cause I'll just go do it myself. [00:47:15] Here's what I need from you. And let's talk about this. And it was a big culture shift for a lot of people and and in some people, you know, it's a constant ongoing. But as they get the results and they see what happens, then they become really bought into this idea of it.
[00:47:30] And then there's a it's because the culture now is one where you know, they want to be out and ahead and leading my job is to make sure they're not going too far.
[00:47:42] Rick: [00:47:42] Yeah.
[00:47:42] Gary Mortensen: [00:47:42] which is crazy what I'm saying that, But it's great to see and, you know, I've got some folks that really, that's not their thing.
[00:47:50] And yet they serve a good role and I've got others who were out there and that's great too. So it's a sort of this little ecosystem of [00:48:00] different skillsets. But you've got to you know, I think that's the number one thing is you just gotta, you've got to have that culture in place.
[00:48:05] If you don't have the culture. It seems like, why is he saying that doesn't make any sense to me when I say something they're going to ask to Gary and that's, you know, that's, if you work here, that's how it is. And I see that with them. Now, as we bring up the new people, it's like, you got to understand something about working here. And so that's top to bottom now being, you know, pretty much communicated.
[00:48:24]Rick: [00:48:24] I've heard you say many times that the acknowledging the human cost that depend demic. Has brought to DUS let alone internationally, but to the U S this year that we have to recognize that this is a generational event and [00:48:45] what will, and out of that, there's the opportunity for the gift.
[00:48:50] if you were to ask yourself five years from now, what was the biggest gift that came out of this generational event? What do you think your future self would say?
[00:48:59]Gary Mortensen: [00:48:59] I would hope that it would be somewhat similar to what happened at the end of 1945, you had a regeneration Severely impacted by a global event. And in the instance of this I, you know, that's the greatest generation, that's that youthful group. And, you know, we're trending in the wrong ways, right?
[00:49:19] I you're hearing about, you know, people are, can't afford to buy houses and you know, the cost of living and we're being dumbed down and China's taking over and you're hearing all these [00:49:30] things. My hope is that five years from now, we're going to say what didn't kill them, made them stronger generation has refound itself.
[00:49:38] I we're watching all of the social unrest that's going on, you know, and in many ways it feels like we're tearing ourselves apart. All the political unrest, everything is happening right now. And yet, you know, I'm seeing, and I'm working with, is this a pretty youthful group? As I said, I couldn't be more proud of them. You know, they'd stand for things. These guys they put their convictions out there and I really appreciate that. There's no, not a lot of hypocrisy that I've seen that maybe I've seen in past years. So I, I hope that from this hardship and real human loss on many levels is [00:50:15] is going to forge something where this generation can maybe undo some of the sins of the past and push our country forward to where, you know, priorities are a little bit more aligned with reality. And, you know, and being proud of making a product, you know what I mean? At the end of the day, we make a product we're proud of and it matters. And and doing that. And also we've been very fanatical about our B Corp values, which has a benefit Corp, which means it's very hard to get, but it means you can do things that not don't just benefit the bottom line, but you're benefiting.
[00:50:48] Your community and your, and the people that work there and the environment. And so, I, I think that's a growing movement and you know, that sort of social responsibility. And I I'd be proud to say that I was, [00:51:00] you know, even at my advanced age, you know, part of that. And and that, and it was actually influenced by my sons and the people I work with and that they will continue to take that leadership role and improve. All the things that need improving and start digging in because it's going to take, so it's a full message, a hopeful thought, you know,
[00:51:21] Rick: [00:51:21] awesome. Much. It inspires me. So thank you for sharing. Gary, this has been fantastic. And I appreciate your time and the ability to talk about the organization and in, in all the leadership and decision-making, that has gone into getting through this year and really building a strong organization going I would encourage the listeners to check out if you haven't been out to Stoller family estate and shalem [00:51:45] winery do so.
[00:51:45] And and hopefully this next year, they'll be able to do that you know, without the mask hopefully, and, but even with the mask it's such a beautiful place to visit. Thank you again, this has been phenomenal.
[00:51:56] Gary Mortensen: [00:51:56] Well, thanks for getting the last thing I'll say is that, you know, you don't get here by yourself. And Rick has been my wing man
[00:52:02] Rick: [00:52:02] This is my shameless plug.
[00:52:04] Gary Mortensen: [00:52:04] Yeah, but it is. I I, you know, I'm not being prompted to say this, but I'm saying it is that, you know, it's really important to have that pro counsel. 'cause you get close to it, you get tired. You know, you question things and that's all human nature and right to do so you have to have someone that you can trust. You can call up and Rick is always available. He's always been available to me. And your insight has been incredibly helpful to me as we've navigated through this, [00:52:30] I insane amount of growth. And then this a big challenge and you've been a great voice for me when I've maybe I've. had some questions. You've always been that, that great resource for me to call up.
[00:52:41] So again, I encourage anybody listening to this to seek out ribs a, as a resource, because it's been just tremendous.
[00:52:48] Rick: [00:52:48] Thank you, Gary. It's been a lot of fun and looking forward to the future successes and challenges as always.
